Wednesday, February 25, 2009

Borrowing and Spending

I am a bit worried that Obama and other leaders have a rather shallow understanding of the way the economy works. The understanding seems to be that a person has a job. Based on the salary of this job, the person borrows money, then spends it on consumer goods which, in turns creates other jobs.

Sometimes evil people have jobs where they make significantly more than other people's jobs. When this happens, the excessively paid greedy person needs to be taxed to the point that their salary falls back in line with the other salaries.

In this view of the economy the private sector of the economy.

In Obama-nomics it appears that the only entity that ever actually invests is the government. Almost all government spending is framed as an investment.

IMHO, this economic view does not do an adequate job of explaining the origins of wealth and prosperity. In light of all the rot in our nation's banks, I believe that this view of the economy as a cycle of interest bearing loans pitted against fixed wage jobs is inherently instable.

What happens when prices change?

I learned a new word today. Apparently the intelligentsia has started using the word Marxian for the large nexus of ideas formed around the writings of Marx. The vast majority of professors and teachers in the public education complex are Marxian.

The problem with Marxism, of course, is that Marxism is an ideology. In contrast Marxian simply refers socio-economic theories adhering to the ideas of Marx.

Obama's view of economics seems to be Marxian in origin. This view of the job being the primary source of economic wealth flows from the strong emphasis put on the theory of labor that we find in Marxian thought. The de-emphasis of private investing in lieu of government ownership of production is also central to Marxian thought.

I was distraught during the election. Obama's 2008 Change Campaign was an all but verbatim repeat of Mao's Cultural Revolution, but I was at a complete loss for the word to describe what he was doing.

The current talking point is that Marxism was bad because it was an ideology. I am happy to have discovered the word "Marxian" because I will be able to talk about why the very ideas (an not just the ideology) is dunderheaded.

BTW, while I don't like Obama's Marxian approach to economics, I do love the United States. The president is saying that we must borrow and spend to get us out of this crisis caused by borrowing and spending. So I went out yesterday and established a new line of credit that I will use to buy a new camera. If I buy the camera, it will be the first time that I borrowed and spent since college (well, other than basic credit card usage...paid off each month).


Anonymous said...

Don't take this wrong as I see where you are heading with this and I am appalled at the support this stimulus package is getting across the country, but I really don't think you get it.

You should've borrowed money for an Econ 101 course.

I ad this only because talk like this undermines the credibility of what would normally be a rational argument against federal largesse. Instead it just sounds written by someone who had no understanding of basic economics and finance. There are plenty of arguments (sound ones) to make against Obama's plan, and the Democrat's attitude toward government, but comparing it to Marxism just puts you one step above Ron Paul supporters and Alaskan cessetionists.

y-intercept said...

I agree that pure name calling and labeling is a big problem. However, there has to be some way to talk about the origins of ideas and where they lead.

Marx was the most influential economist of the last two centuries.

Labor value theory was central to Marx. This manifests itself as an emphasis of jobs as the primary economic unit.

I was feeling sad that I could not mention this without the accusation tht I am labeling. So I decided to google and see how others approach the topic.

If Marxists have started to refer to their ideologies (err, I mean non-ideologies) as Marxian, perhaps I could do the same.

Anyway, the largess of the bill is a problem. Perhaps there is fundamental thinking that is harmful as well.

BTW, I dislike when Republicans emphasize jobs over the creation of wealth or simply jobs over well being.